March 27, 2020
The Honorable Steven T. Mnuchin
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, DC 20220
Dear Secretary Mnuchin:
Thanks to your leadership, the Treasury Department and Internal Revenue Service delayed the tax filing and tax payment deadline for 90 days to assist struggling Americans during the COVID-19 pandemic. I am writing to respectfully request you also delay the tax deferral treatment for real estate like-kind exchanges under section 1031 of the Internal Revenue Code.
Like-kind exchanges stimulate the economy by encouraging investors of all sizes to remain invested in real estate. Investors are able to balance their assets and shift resources to more productive properties, change locations, or diversify holdings. Studies show that in 88 percent of cases, investors dispose of properties acquired in a like-kind exchange through a taxable sale and that taxes paid in such cases are on average 19 percent higher than taxes paid when an ordinary sale is followed by an ordinary sale.
I have heard from many Pennsylvanians who are concerned about their ability to comply with the statutory 45-day or 180-day requirements for identifying and closing on a replacement property due to the COVID-19 outbreak. Without a delay, these individuals may lose out on the tax deferral they planned on when executing the transaction. This could create serious financial hardship for my constituents, not to mention the adverse impact it will have on our economy.
In previous presidentially declared disasters, it is my understanding that regulatory relief for section 1031 like-kind exchange deadlines has been granted. I believe the COVID-19 pandemic deserves the same treatment. Therefore, I again request that you delay the tax deferral treatment for real estate like-kind exchanges under section 1031 of the Internal Revenue Code. Thank you for leadership during this crisis and for your work on behalf of all Americans.
Very Respectfully,
Guy Reschenthaler
Member of Congress